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MANAGING YOUR INDIRECT SUPPLY CHAIN

Summary

A leading Alberta-based oil sands producer operates an ambitious joint venture owned by several large oil and gas companies.

The producer needed an integrated maintenance, repair and operating (MRO) supply chain to meet higher safety, production and maintenance targets. The goal of the effort: to help boost daily sand-oil production from approximately 300,000 barrels today to 550,000 barrels in 2016. The company asked DHL Supply Chain to support this effort through better management of indirect supplies.

DHL Supply Chain became the first 3PL to integrate logistics and procurement management in the oil-sands industry, providing this customer with a single point of contact for indirect supplies in compliance with internal procedures and external regulations. And, end-to-end visibility now lets vendors and end users, as well as DHL Supply Chain and other business partners, know exactly when maintenance supplies are delivered or shipped from warehouses, cross-docks and the oil-sands fields.

Ed Smith Vice President, Business Development, United States and Canada, Energy and Chemical

Customer Challenge

As production was rapidly ramping up, the company needed to integrate and optimize a fragmented MRO supply chain and better manage the costs of increasingly scarce labor. Equally important was reducing overall spending and cost of ownership while increasing plant and personnel productivity. A key program objective included improving on-time delivery of MRO supplies. This would reduce the total cost of MRO by decreasing wait times for the customer’s maintenance community and increasing supply and tool availability.

DHL Supply Chain Solution

The first phase of DHL Supply Chain’s solution included plant and design audits of the supply chain network, with a focus on labor, warehouses, suppliers, points of consumption, transportation and IT integration. DHL then formulated a comprehensive solution that eliminated non value-added handoffs in the chain and integrated logistics and procurement services.

The solution defined supplier pickup schedules in Calgary, Edmonton and Fort McMurray, and established two strategically located cross docks as integration points, moving various material handling activities (such as receiving and priority sortation) offsite to consolidate orders and reduce deliveries.

DHL established a partnership with an Aborigine-owned group of companies to transport MRO material from suppliers in Fort McMurray to the DHL-managed cross dock, then to all mining and production areas for distribution (in-plant deliveries include warehouses, tool cribs, site stores, open bins and end-users).

Strategic material is more effectively sourced, from vendor bid to complete supplier management, and from procurement to payment. For greater reliability and efficiency, DHL implemented inventory management systems to reduce order and delivery time of MRO supplies to the customer’s maintenance organization. DHL also contracted with a Canadian mechanical services company to ensure that all tools distributed from the tool cribs are repaired quickly and effectively, keeping critical mining and upgrading operations up and running.

Customer Benefits

The solution paid considerable dividends to the customer by eliminating redundancies in the supply chain and identifying savings through increased productivity levels for maintenance, tool crib and sites stores personnel. DHL Supply Chain’s unique MRO solution separated and analyzed the distribution and material costs of tools and supplies to enhance control and better understand the total cost of ownership.